Embezzlers often avoid prison time

Editor’s note: This is the second and last part of a series on embezzlement cases in Eagle County.

Although she pleaded guilty to stealing $864,000 from her employers, Karen Kaffka didn’t go to prison, not even to jail. Doris Flores, another embezzler convicted of stealing $19,178, got 15 days in jail and 4 years of probation. And Christina McCann, convicted of stealing $103,000, got a 4-year deferred sentence and 30 days in jail.

“However, a second-time offender has a pretty good chance of going to prison,” Hurlbert says.

In October 2002, Brenda Dobbs, a third-time offender, was sent to prison for five years. Dobbs also has to pay $530,000 in restitution to NSN Network Services in Gypsum. She had been previously convicted for theft in Eagle and Arapahoe counties.

About one third of the 44 cases – 13 are still pending – prosecuted by the Eagle County District Attorney’s Office from 2001 to 2003 received some jail time, from 2 days to 90 days. Only one defendant was sent to prison. But all of the embezzlers were ordered to pay restitution to the victims.

Most of the embezzlers were also sentenced to probation, community service and deferred judgements.

For example, Javier Vargas got 15 days in jail, 40 hours of community service and 3 years of probation for stealing $855. But Kaffka didn’t get any jail time for stealing more than $2 million – $1.5 million of which she has already returned. She was sentenced to 20 years of probation, community service and ordered to pay restitution.

“Each embezzlement is a special one and the way the defendants are treated depends on their history and methods of stealing,” Hurlbert says. “Most of the time, you don’t know where the embezzled money goes. You see people with gambling and drug problems.”

“The easy payment plan’

Sandy and Kathy Treat, owners of Edwards-based Summit Habitats, agreed to a sentence without jail time for Kaffka, who was convicted of embezzling $2 million over a five-year period from their company. Kaffka will have to pay the Treats $864,000 in restitution.

“This has been hard on our business. I hope in my heart that she can do it,” Sandy Treat said after Kaffka’s sentencing in June.

Jeff Antonius, a homeowner at Vail Point, says in part he rejects the plea bargain for Brandon Outlaw because he doesn’t think he’ll ever make the

payments for the $650,000 in stolen condo fees. Outlaw’s plea bargain includes a check for $112,000 that would be divided among hundreds of victims. Antonius says Outlaw stole $107,000 just from Vail Point.

A judge still has to decide if he will accept the sentence proposed in the plea bargain.

“For him to have it on the easy payment plan, it will never happen,” Antonius says. “We are not confident that these payments will ever come.

“We want closure,” he adds. “We are willing to give up the $100,000 settlement for him to be in jail. This place shouldn’t be a haven for people to come and commit white collar crime.”

Ken Lane, spokesman for Colorado Attorney General Ken Salazar, says he agrees with Hurlbert in that white collar crime doesn’t usually result in jail and prison sentences.

“We have gone after white color activity – insurance fraud, security fraud – and we have sought prison,” Lane says. “But sometimes prosecutors have to decide between restitution vs. prison time. You have to decide who gets the prison bed: the white-collar criminal or the violent criminal, maybe a sex offender or murderer. Prosecutors and judges are most likely to want to lock up a violent offender because they are a risk for society.”

Local defense attorney Terry O’Connor says it’s easier in embezzlement cases to make a victim whole through restitution.

“That’s why it’s easier to work favorable dispositions in embezzlement cases,” he says. “At first glance, those cases aren’t fair. Theft is a felony crime that could be at the same level of distribution of drugs. However, society views violent crimes as more serious and more dangerous to society.”

But the atmosphere is changing, somewhat, Lane says.

“Courts and prosecutors are recognizing that white collar crimes are every bit as devastating as a violent crime,” he says.

Preventing embezzlement

It was only as a result of the Vail Point Homeowners’ Association having terminated the management agreement with PRM Realty that the numerous embezzlements actually surfaced, says Michael Sample, a Vail Point homeowner.

Outlaw worked for PRM Realty, a property management company.

“When we terminated PRM and demanded return of books, records and bank accounts, the stuff hit the fan,” Sample says.

Embezzlement is a crime that takes time to discover, O’Connor says.

“Victims don’t have a system in place to detect it,” he explains.

Lane says embezzlement becomes an opportunity when a business owner has a poor accounting system.

“Criminal law experts around the country often advise to never have the same person collecting the money and writing the checks to pay the bills. They recommend more than one person to be involved in the accounting process, so they can check the books,” Lane suggests.

Since the embezzlement, Antonius says Vail Point has a different property manager. As a result of the theft, James Poppleton, owner of PRM Realty, went out of business. He has also paid more than $50,000 in attorney’s fees.

“We’re not as trustful anymore,” Antonius said. “And we watch the books very closely.”

Still, Antonius says embezzlements are too common and the punishment is far too lenient.

“Why not steal?” he says. “If you get caught, you pay it back. There is a law against stealing. And there should be a punishment. Otherwise, there’s no deterrent to steal. This doesn’t send a good message to younger people.”

– Karen Kaffka – A judge in June sentenced Kaffka, the former chief financial officer for a local general contractor, to 20 years probation for embezzling $2 million from the company.

Kaffka, 46, who now lives in Henderson, Nev., will not serve jail time, but will have to pay $864,000 in restitution to Sandy and Kathy Treat, owners of Edwards-based Summit Habitats, Eagle County District Judge Tom Moorhead ruled.

Kaffka was charged with one count of theft, a class 4 felony that carries a possible penalty of 2 to 6 years in jail, a fine of $2,000 to $500,000 and a mandatory 3 years of probation.

Kaffka was convicted of embezzling $2 million over a 5-year period from Summit Habitats. Kaffka already has paid the Treats back $1.5 million.

– Brenda Dobbs – In October 2002, Dobbs was sentenced to 5 years in prison for stealing more than $530,000 from NSN Network Services.

Dobbs, 55, was in charge of collecting payments from clients at the NSN office in Gypsum. This was Dobbs’ third conviction for theft – the second in Eagle County – and she plead guilty to one count of theft.

– Mark Mogul – On Oct. 8, real estate agent Mark Mogul entered a new plea of not guilty after a district judge rejected a plea agreement and set the embezzlement case for trial. In June, Mogul, 44, of Edwards, pleaded guilty to stealing $351,000 from time-share sales in Edwards.

Mogul had accepted a plea agreement from the Eagle County District Attorney’s office that included no jail if he paid $351,000 in restitution. Mogul, who had pleaded guilty to a class four felony theft charge – which can carry 2 to 6 years in prison – had agreed to pay Crescent Club Investors and Crescent Club Holdings, the victims in the case, $7,900 a month until all the money was paid off. Deputy District Attorney Dave Moffet also had requested a 30-day jail sentence for Mogul.

County Judge Fred Gannett accepted the plea in June, but District Judge Richard Hart rejected the plea at a sentencing hearing this month, saying the victims were against the deal. Following Hart’s decision, Mogul entered a not guilty plea and a five-day jury trial was set for March 29.

– Brandon Outlaw – On Oct. 8, Outlaw pleaded guilty to stealing more than $700,000 in local condo fees. In spite of several homeowners’ pleas to reject an agreement, District Judge Tom Moorhead moved forward with a plea agreement offered by District Attorney Mark Hurlbert that includes restitution of $112,000 and no jail time. Sentencing is set for Dec. 16.

Outlaw, 30, of Avon, pleaded guilty to one count of theft, a class four felony that can carry a sentence of 2 to 6 years in prison, and one misdemeanor sexual offense. Outlaw could have faced between 4 and 12 years in prison for the initial charges.

Moorhead, however, could accept Hurlbert’s request of a 6- to 12-month home detention sentence. Outlaw’s attorney requested that be served in Tulsa, Okla., where Outlaw will work.

Case totals

Total embezzlement cases in Eagle County from January 2001 to October 2003: 44